Thursday, October 4, 2012

GW Plastics Holdings is selling all its business under the two subsidiaries, Great Wall Plastic Industries and GW Packaging, to Scientex for RM283.2m. GW Plastics will then return virtually all the sales proceed to its shareholders and ultimately seek delisting from Bursa Malaysia. Estimated cash per share payout is RM1.19. This deal will turn Scientex into one of the world's largest industrial plastic packaging players. Scientex said the acquisition, which is due for completion by Mar-2013, will enlarge its industrial cast film production capacity to 154,000 tonnes from 120,000 tonnes. The takeover will also allow Scientex to gain entry into the rapidly expanding global food and beverage (F&B) market segment via GW Plastics' blown film, and downstream printing and lamination facilities. Scientex MD Lim Peng Jin said the enlarged entity will see about RM1bn in sales. "It will also be earnings' enhancing, allowing the post-acquisition enlarged entity to benefit from cost-savings as a result of economies of scale, in terms of operations and administrative efficiencies as well as in the procurement of raw materials," Lim said. Scientex has a cast stretch film facility in Pulau Indah, Selangor, which currently has nine production lines. Cast stretch film is mainly used for applications in the logistics and industrial sectors.(BT)

MRT Corp has awarded three elevated station contracts worth RM732.2m in total for MRT SBK line. Naim Holdings won a RM204.7m job to build stations at Taman Industri Sungai Buloh, PJU 5 and Kota Damansara. UEM Construction will build stations at The Curve, One Utama and Dataran Sunway for RM275.8m. Apex Communication won the RM251.7m job to build stations at Saujana Impian, Bandar Kajang and Kajang. MRT Corp CEO Datuk Azhar Abdul Hamid said he three winning companies were the appointed, nominated sub-contractors for the elevated civil work packages held by Gadang, Mudajaya, and UEM Construction. No contract for track works is awarded yet, which involves 41.5km of track laying from Sungai Buloh to Kajang. The job is estimated to worth some RM850m. MRT Corp has awarded 48 out of the total 85 packages for the SBK line. (BT)

The Malaysian crude palm oil export tax policy that is unchanged since the 1970's will likely see a downward revision to between 8-10% from the current 23%. Plantation Industries and Commodities Minister Tan Sri Bernard Dompok said he would present a proposal to the cabinet tomorrow and the proposal is understood to contain some measures to stabilise the current CPO price. "I think this (lowering of CPO export duty) will put us in a very much competitive position as the difference will be the same as Indonesia, which has a 13.5% export tax." he said. (StarBiz)

The Construction Industry Development Board (CIDB) is initiating a proposal for the setting up of a Construction Court as a response to the construction industry's demand for a dedicated channel to resolve construction-sector disputes. Should the proposed Construction Court materialise, Malaysia will be the second country in the world after Britain to have established a specialist court dedicated for the construction industry. CEO Datuk Seri Dr Judin Abdul Karim said the board has worked closely with the Bar Council and industry leaders to initiate discussions on the setting up of a specialist court, which will focus on resolving complex and technical construction disputes. "Establishing the Construction Court is vital for the construction sector as speedy dispute resolutions often require knowledge of industry intricacies and technical complexities," he said. (BT)

UEM Group expects to sell its 45% subsidiary Time Engineering by year-end. Government-linked UEM has been mulling over divesting its Time Engineering stake since 2010, which it sees as a non-core asset. UEM has four core business divisions - expressways, township and property development, engineering and construction, and asset and facility management. Group MD/CEO Datuk Izzaddin Idris said the diversified group is currently in talks with local suitors and hopes to complete the sale by year-end. "Once the board of directors meets and approves the sale, we will call you (the media) in due course," he said. Time Engineering previously owned a 24.7% stake in Internet service provider Time dotCom before disposing of it for RM287m in 2011. As at 2011, its price tag was said to be at least RM166m. (BT)

AZRB has won a RM673m job to redevelop Bangunan MAS in Jalan Sultan Ismail. The contract was awarded by Permodalan Nasional Bhd (PNB). PNB bought the 35-storey building from national carrier Malaysia Airlines about five years ago for RM130m. AZRB will demolish an existing podium at the 35-storey building, build a 50-storey hotel and upgrade the existing 35-storey office building. The hotel will also have six-storey basements for car park and mechanical and electrical service area. Construction is expected to be completed by Oct 17. (BT)

The country's four largest banks have agreed to cooperate with the government to offer a housing loan scheme to civil servants. A concrete plan will be announced by the end of the year. "If we outsource to the banks, we don't have to fork out RM6bn annually...the amount we allocate for housing loans to civil servants. But we have to cover the difference in interest...the civil servants still pay 4%." Finance secretary-general, Datuk Dr Mohd Irwan Serigar Abdullah said. (Financial Daily)

Maxis chief executive officer Sandip Das said in a statement "We laud the measures announced (by the prime minister) particularly in the areas of education and training, which is a key part of nation-building,". The incentives announced for smartphones and the establishment of Internet centres is a reflection of Maxis' ambition to bridge the digital divide and expedite adoption of contemporary global technology by the underserved, he added. (BT)

Tobacco growers and curers in Kelantan have joined the global fight against the World Health Organisation (WHO) plan that threatens their jobs and livelihoods. About 15k local players will be among millions of tobacco growers worldwide waiting for their fate come next month following discussion on the WHO's Framework Convention on Tobacco Control (FCTC). Kelantan Tobacco Growers and Curers Association said draft recommendations on tobacco farming and environmental practices could force its communities out of business through punitive measures. Under the earlier WHO's FCTC, the proposals encouraged governments to help tobacco growers find viable alternatives to growing tobacco with the assumption that demand would decline over time. At present, WHO has taken a radically different track to phase out tobacco growing without finding viable solutions to tobacco growers' livelihoods. (BT)

Malayan United Industries (MUI) chairman Tan Sri Khoo Kay Peng continued to accumulate shares in the group, effectively increasing his stake to 11.8%. There has been speculation over Khoo's possible comeback to the Malaysian corporate scene after he was seen at a luncheon with Prime Minister Datuk Seri Najib Razak and other leading Chinese businessmen. (Financial Daily).

Danainfra Nasional is finalising plans to issue RM1.5bn sukuk tranche by mid-November to finance the MRT SBK line, with one portion to be marketed as retail bond as mooted by Budget 2013. The issuance, part of the RM8bn ICP/MTNs programme signed in early July, will see one fifth of it, or RM300m, being floated as retail bond. "This is an opportunity to widen the investor base for the MRT project. However, should retailers fall short, we expect the corporates to snap up the retail bond portion." Principal officer Fazlur Rahman Ebrahim said. (Malaysian Reserve)

Instacom Group, a Sarawak-based telecommunications engineering and services provider, has forecast a revenue of RM88m for its 2012 financial year. Its chief executive officer, Anne Kung, said the confidence on the forecast was based on the after-tax profit guarantee of about RM15m made for the current financial year, as well as for FY2013. "That guarantee gives an indication of our confidence to generate this profitability," she said in a media briefing to announce the re-listing of Instacom on Bursa Malaysia Securities. She said last year the group achieved a turnover of RM87m and profit after tax of RM9.9m. On the re-listing of the group, she said the exercise commenced after the conclusion of a reverse takeover of I-Power Bhd, which was approved by Bursa Malaysia in April. The re-listing is a very important milestone for Instacom, being a Sarawakian company with a strength in the services sector, rather than resource- or manufacturing-based, she added. (Bernama)

The government's continuing quest to build up a strong domestic economy is crucial to ensure sustainable growth and cushion the nation against downside risks due to the volatile global economy, PM Datuk Seri Najib Tun Razak said yesterday. He said that creating a stronger domestic economy and consolidating subsidies are among pivotal thrusts of the government as evidenced by proposals made in the 2013 Budget. Getting a fresh mandate from the upcoming general election is crucial to ensure continuity of the Economic Transformation Programme (ETP) and Malaysia achieving its high-income nation status, he said. Through the implementation of projects under the ETP, Malaysia would be able to reduce the country's dependency on resources like oil as the major source of revenue while developing other sectors that can generate new revenues, he said. Besides diversifying the income stream for the country, he said that it was important to rationalise subsidies and deliver targeted subsidies to certain groups. He said that it would not be right to raise prices of subsidised items just after getting a mandate for the next five years as the people might question the government's sincerity. He also pointed out the importance of having free trade agreements on the back of global uncertainties and strengthening trade relations between Asean countries and East Asian countries to build a strong domestic economy. (BT)

PM Datuk Seri Najib Tun Razak highlighted his administrations’ growing resolve to rein in government debt by pointing out smaller deficit goals and let on the possibility of a budget surplus materializing after 2016 during an interview with CNBC Asia anchor Martin Soong yesterday. “By 2015, the budget deficit would be 3% of GDP. And beyond that, I would like for us to see a surplus, if possible. But I’m not going to commit to that surplus yet. Let’s get to 2015 first,” he said. (Financial Daily)

The world economic crisis could take 10 years to run its course, the IMF's chief economist Olivier Blanchard said, whilst urging greater solidarity between member countries of the eurozone and more integration in fiscal and economic policy. (AFP)

The US ISM non-manufacturing index rose to 55.1 in Sep, the most in six months, from 53.7 in Aug. Economists were expecting a reading of 53.4. (Bloomberg)

The ADP National Employment Report showed US private employers added 162,000 jobs in Sep, but fewer than the revised 189,000 hired in Aug. (Reuters)

Eurozone producer prices climbed 0.9% mom in Aug, the most since Jan, after rising from a downwardly revised +0.3% in Jul. On a yoy basis, the measure gained 2.7% in Aug, faster than the 1.6% recorded in Jul. (MNI News)

The final reading of the eurozone composite PMI fell to 46.1 in Sep from 46.3 in Aug, above an initial estimate of 45.9 published 20 Sep. The services PMI slipped to 46.1 from 47.2. (Bloomberg)

Portugal unveiled a 4% extraordinary tax and income tax brackets would be reduced from eight to five. The average tax hike would rise from 9.8% in 2012 to 13.2% in 2013. New measures also include new levies on capital gains and a financial transaction tax, though details of these moves have yet to be finalized. (CAN)

The ADB forecast Asia excluding Japan’s expansion will hit 6.1% this year (6.6% in the Jul estimate; 6.9% in the Apr prediction), the slowest pace since 2009, before rising to 6.7% in 2013. It also reduced the region’s inflation forecast for 2012 to 4.2% from 4.4%. China's GDP was tipped to expand 7.7% this year before bouncing back to 8.1% in 2013, but still well below the 9.3% achieved last year. India would see GDP growth slow to 5.6% in 2012 before picking up to 6.7% next year. Thailand’s 2012 growth forecast was lowered from 5.5% to 5.2%, whilst 2013’s growth was cut to 5% from 5.5%. (Bloomberg, AFP, Bangkok Post)

China’s official services PMI fell to 53.7 in Sep from 56.3 in Aug, indicating the industry’s expansion was the least in over a year. (Bloomberg)

Japan’s monetary base rose 9% yoy in Sep to a record ¥124.3tr (6.5% in Aug), as ultra-easy monetary policy led to an increase in the current account deposits that commercial banks keep with the Bank of Japan. (Business Times)

Indian Prime Minister Manmohan Singh is seeking to build on the biggest opening of the country’s economy in a decade with the cabinet today scheduled to consider proposals to lift caps on foreign investment in insurance and pension industries. (Bloomberg)

Thailand’s consumer confidence index fell to 77 points in Sep, down from 77.9 points in Aug and 78.1 in Jul, according to the University of the Thai Chamber of Commerce's Center for Economic and Business Forecasting.(Bangkok Post)

Eight key areas in Bangkok could be under as much as 30cm of water for up to two weeks this month, especially when Tropical Storm Gaemi brings in torrential rain this weekend, a Bangkok seminar on flood prevention was told yesterday. (The Nation)

Bank of Thailand chairman Virabongsa Ramangkura is adamant that the policy rate could be slashed without damaging long-term economic stability, arguing that lower interest rates would benefit the economy as well as the central bank's finances. He added that the Pheu Thai government's massive investment in infrastructure will be the catalyst to strengthen the country's manufacturing and logistics competitiveness (The Nation)

The revised Power Development Plan (PDP) spanning 2013-30 requires a total budget of THB800bn for power plants and transmission lines, said the Electricity Generating Authority of Thailand (Egat). (Bangkok Post)

Myanmar's economic growth will speed up as most other economies in developing Asia are expected to see slower growth amid a slump in global demand, the Asian Development Bank said. (The Nation)

Hundreds of thousands of workers from more than 700 companies in 80 industrial estates across Indonesia staged a one-day strike Wednesday in the latest of the country's frequent labor protests. The protesters allege that employers largely ignore legal obligations to contribute to pension funds and state health care. They are also seeking higher levels of minimum wage and a reversal of the government's plan to require low-income workers to contribute to payment for health-care premiums beginning 2014. (WSJ)

Australia's trade deficit blew out to A$2.03bn (US$2.07bn) in Aug (-A$1.5bn in Jul), its widest in three-and-a-half years, as falling prices for iron ore and coal ate into export earnings. (WSJ)

Asia FX By Cornelius Luca - Wed 03 Oct 2012 15:29:46 CT (Source:CME/www.lucafxta.com)
The appetite for risk was mixed on Wednesday amid mixed US data. Yet, most of the foreign currencies ended lower. The US stock markets made little progress, while oil plunged 4%. The short-term outlook for most of the major foreign currencies is sideways. The medium-term outlook for most of the foreign currencies is slightly bullish. The LGR short-term model is short on all foreign currencies. Good luck!

Overnight
US: The ADP employment survey showed a drop to 162,000 in September from 201,000 in August.
US: The ISM service sector rose to 55.1 in September from 53.7 in August.

Today's economic calendar
Australia: AiG Performance of Services Index for September
Australia: Building permits for August

GLOBAL MARKETS-Asian shares steady, investors wait for more US data
TOKYO, Oct 4 (Reuters) - Asian shares steadied and the safe-haven dollar eased after positive U.S. data, leaving investors waiting for more economic indicators from the world's largest economy later in the day and a European Central Bank policy meeting.
"The FOMC minutes may shed some light on any possible dimensions surrounding the improvement in the labour market the committee is looking for and scale of purchases they are willing to undertake," ANZ Bank said in a research.

Asia Stocks Swing Between Gains, Losses on U.S. Data, Oil (Bloomberg)
Asian stocks swung between gains and losses as exporters rose on reports on U.S. jobs and service industries beat economist estimates. Energy companies dropped as oil traded near a two-month low. Toyota Motor Corp. (7203), the world’s biggest carmaker by market value, rose 2 percent. Fisher & Paykel Appliances Holdings Ltd. gained 1.7 percent in Wellington after directors of the refrigerator maker rejected a bid from China’s Haier Corp., saying it is too low. Woodside Petroleum Ltd., Australia’s second-largest oil producer, slid 1.9 percent in Sydney. The MSCI Asia Pacific Index (MXAP) lost 0.1 percent to 121.43 as of 10:45 a.m. in Tokyo, reversing gains of as much as 0.3 percent. The regional index gained 4 percent in September amid speculation China will add to stimulus measures, following moves by central banks in the U.S. and Japan. Australia cut its benchmark interest rate this week.
U.S. jobs data “was a little bit better than expectations and that’s positive,” said George Boubouras, Melbourne-based head of investment strategy at the Australian wealth-management unit of UBS AG. The Swiss bank has about $1.5 trillion in assets under management. “Stimulus is there for a reason.” The Nikkei 225 Stock Average (NKY) rose 0.1 percent and Australia’s S&P/ASX 200 Index was little changed. Hong Kong’s Hang Seng Index dropped 0.1 percent. South Korea’s Kospi Index declined 0.6 percent. Markets in China remain closed today for holidays. Futures on the Standard & Poor’s 500 Index added 0.1 percent today. The index gained 0.4 percent in New York yesterday, when ADP Employer Services said companies added 162,000 jobs last month, exceeding the median forecast of economists surveyed by Bloomberg for a 140,000 advance. Service industries in the U.S. expanded more than forecast in September.
The MSCI Asia Pacific Index gained 6.7 percent this year through yesterday as policy makers boosted stimulus measures to counter a global economic slowdown and tame Europe’s debt crisis. The Asian benchmark index traded at 12.8 times estimated earnings, compared with 13.8 times for the Standard & Poor’s 500 Index and 12 times for the Stoxx Europe 600 Index.

Japanese Stocks Advance on U.S. Employment, Services Data (Bloomberg)
Japanese stocks rose, with the Nikkei 225 (NKY) Stock Average headed for its first gain in five days, as reports on U.S. jobs and service industries beat expectations. Shares extended gains after the yen weakened. Honda Motor Co. (7267), a carmaker that depends on North America for 44 percent of its sales, climbed 3 percent. Izumi Co., a shopping-center operator, jumped 23 percent after announcing a share buyback and raising its net-income forecast. Computer- printer maker Canon Inc. (7751) fell 2.7 percent after Hewlett-Packard Co., the world’s largest manufacturer of personal computers, projected 2013 profit that missed estimates. The Nikkei 225 gained 0.6 percent to 8,800.76 as of the midday break in Tokyo, with volume was 13 percent above 30-day average. The broader Topix Index advanced 0.9 percent to 733.79, with about two stocks rising for each that fell.
U.S. jobs data “was a little bit better than expectations and that’s positive, but stimulus is there for a reason,” said George Boubouras, Melbourne-based head of investment strategy at UBS AG’s Australian wealth-management unit. The Swiss bank oversees about $1.5 trillion in assets. “They need to really address true labor-market accelerations in North America.” The Topix has fallen 0.2 percent this year as of yesterday on a strengthening yen as investors sought refuge amid a slowing global economy, weighing on export-heavy Japan. Shares on the Topix trade for about 0.87 times book value, compared with 2.25 for the Standard & Poor’s 500 Index and 1.51 times for the Stoxx Europe 600 Index. A number lower than one means a company can be bought for less than the value of its assets.

U.S. Stocks Rise as Service, Jobs Data Offset China (Bloomberg)
U.S. stocks rose, sending the Standard & Poor’s 500 Index higher for a third day, as better- than-forecast growth in American employment and service industries offset concern about China’s economy. PulteGroup Inc. (PHM) led homebuilders to the biggest rally since July as mortgage applications climbed to the highest level in more than three years. Best Buy Co. jumped 4.7 percent on a report the retailer’s founder and buyout firms are scrutinizing the company’s finances. Hewlett-Packard (HPQ) Co. tumbled 13 percent after the computer maker forecast fiscal 2013 profit that missed estimates as Chief Executive Officer Meg Whitman said a turnaround effort won’t happen any time soon.
The S&P 500 rose 0.4 percent to 1,450.99 at 4 p.m. in New York. The benchmark index for American equities has climbed 0.7 percent in three days. The Dow Jones Industrial Average added 12.25 points, or 0.1 percent, to 13,494.61 today. Volume for exchange-listed stocks in the U.S. was 6.2 billion shares, or 4.4 percent above the three-month average. “Today’s data is saying very clearly that we’re not heading to a recession,” Thomas Sowanick, chief investment officer of Omnivest Group LLC, which oversees $3 billion in Princeton, New Jersey, said in a phone interview. “Investors are getting a little bit more optimistic about the future,” he said. Weak data from China “increased the likelihood that the Chinese central bank or some other mechanism is focusing on providing liquidity to the economy.”

European Stocks Little Changed as Data Offsets Spain (Bloomberg)
European stocks closed little changed as U.S. reports on private hiring and services-industry growth beat estimates, offsetting Spain’s stance that it won’t ask for a sovereign bailout soon. EasyJet Plc (EZJ), Europe’s second-biggest discount airline, rose 3.5 percent as full-year earnings beat its forecasts. BTG Plc (BTG) gained the most in almost a year after increasing its financial- year revenue forecast. FirstGroup (FGP) Plc plunged 21 percent after Britain’s biggest train operator was stripped of the country’s premier express route. The Stoxx Europe 600 Index (SXXP) slipped 0.1 percent to 271.37 at the close in London, after swinging between gains and losses at least 12 times today. The gauge has rallied 16 percent from this year’s low on June 4 as European Central Bank policy makers agreed on an unlimited asset-purchase program and the Federal Reserve announced a third round of quantitative easing.
“It’s a good sign when the market starts reacting to macro data again,” said Anja Hochberg, head of investment strategy at Credit Suisse Group AG in Zurich. “The latest economic numbers show that the economy is bottoming out. However -- and this speaks for an even bigger upside potential of the markets -- the economic hopes still need to show in real terms. The sentiment is not yet exhausted. One more reason to invest in equities.” National benchmark indexes fell in half of the 18 western European markets today. France’s CAC 40 retreated 0.2 percent, the U.K.’s FTSE 100 gained 0.3 percent while Germany’s DAX rose 0.2 percent.

Emerging Stocks Fall for First Time in Five Days on Oil (Bloomberg)
Emerging-market stocks declined for the first time in five days as falling crude-oil prices dragged producers lower and China’s service industries expanded at the weakest pace in more than a year. The MSCI Emerging Markets Index (MXEF) slid 0.4 percent to 1,002.50. Brazil’s Bovespa stock index (VXEEM) dropped 1 percent, with power company Cia. Energetica de Sao Paulo and state-controlled oil producer Petroleo Brasileiro SA falling. Russian oil company OAO Tatneft (TATN) declined 2.2 percent, after profit sank 17 percent in the first half. PetroChina Co., China’s biggest oil producer, slid 1 percent. Indexes in Russia, Turkey and Mexico retreated.
Oil fell below $90 a barrel in New York after U.S. crude stockpiles climbed for a fourth week and concern rose that demand will decline as the Chinese economy weakens. China’s non- manufacturing purchasing managers’ index slid to 53.7 from 56.3 in August, according to official reports today, underscoring a slowdown that spurred the Asian Development Bank to lower its 2012 regional growth estimate. “The Chinese PMI figure was not fantastic, and even though services is not a main sector in China, it has some negative impact,” Guillaume Tresca, a senior emerging market strategist at Credit Agricole Corporate & Investment Bank, said in a phone interview from Paris. “Falling oil prices may lead the market lower in the short term, but it provides emerging market central banks with some leeway to carry out rate cuts.”

Yen Holds Losses Versus Major Peers Before BOJ Decision (Bloomberg)
The yen remained lower against all 16 major counterparts before the Bank of Japan (8301) begins a two-day policy meeting today after expanding stimulus last month. The euro was 0.9 percent from a three-week low versus the dollar before Spain sells bonds as investors weigh whether the debt-saddled nation will ask for an international bailout. European Central Bank policy makers convene today to discuss ways to contain fiscal turmoil in the region. The Australian dollar slid to a four-week low after data showed the nation’s retail sales rose by less than economists had expected. “In a situation where stock prices fall and dollar-yen declines, I expect the BOJ to bolster aggressive monetary easing,” said Kengo Suzuki, a currency strategist in Tokyo at Mizuho Securities, a unit of Japan’s third-largest bank by market value. “Such a move would keep the yen in check.”
The Japanese currency slid 0.2 percent to 78.65 per dollar as of 11:41 a.m. in Tokyo after touching 78.66, the weakest since Sept. 19. It dropped 0.3 percent to 101.60 per euro, set for a sixth-straight decline. The 17-nation euro fetched $1.2922 from $1.2905. The currency reached $1.2804 on Oct. 1, the lowest since Sept. 11. The BOJ increased its asset-purchase program by 10 trillion yen ($127 billion) to 55 trillion yen at the previous meeting on Sept. 19, saying the economy’s pick-up was slowing while prices were flat. Data over the past week have added to the case that the BOJ will need to expand stimulus to boost growth and achieve its 1 percent inflation goal. Consumer prices in August matched the steepest decline in 16 months and the nation’s biggest manufacturers grew more pessimistic last quarter.

FOREX-Euro waits for Spain's move; Aussie slips on trade data
SYDNEY/TOKYO, Oct 3 (Reuters) - The euro steadied on Wednesday as traders tried to gauge how close Spain is to asking for European financial aid, while the Australian dollar slid to a four-week low after Australia posted its biggest trade deficit in 3-1/2 years.
"Rajoy has taken reform steps so he can apply for aid anytime he needs. That should discourage speculators from selling the euro too aggressively," said Seiya Nakajima, chief economist at Itochu Corp, referring to Spanish Prime Minister Mariano Rajoy.

Treasury Yields Near Month-Low Before German Factory Data (Bloomberg)
Treasury 10-year yields were near the lowest in almost a month before data tomorrow that may show factory orders in Germany dropped, adding to evidence the euro bloc’s debt crisis is hurting the economy, the region’s biggest. U.S. government bonds remained higher following a four-day advance ahead of an auction of Spanish debt today as investors weigh whether the nation will ask for an international bailout. The Federal Reserve is scheduled to buy today as much as $2.25 billion of Treasuries maturing from February 2036 to August 2042 as part of its program to replace shorter-term notes in its holdings with longer-maturity debt. “The euro area’s core countries, such as Germany, have supported the region’s growth, but their economies are getting worse now,” said Hitoshi Asaoka, a Tokyo-based senior strategist at Mizuho Trust & Banking Co., a unit of Japan’s third-largest lender by market value. “Demand for Treasuries as a safe asset remains strong.”
The yield on 10-year notes was little changed at 1.62 percent as of 10:53 a.m. in Tokyo. It fell to 1.60 percent yesterday, the lowest since Sept. 7. The 1.625 percent security due August 2022 traded at 100 1/32 today, according to Bloomberg Bond Trader data. Japan’s bonds were little changed, with 10-year yields at 0.765 percent in Tokyo, according to Japan Bond Trading Co., the nation’s largest interdealer debt broker. The rates fell to 0.755 percent on Oct. 2 and 3, the lowest since Aug. 7. German factory orders, adjusted for seasonal swings and inflation, probably slid 0.5 percent in August from the previous month, according to the median estimate of economists in a Bloomberg News survey.

Global Services Weaken as Europe Slides Into Recession: Economy (Bloomberg)
Services industries from Asia to Europe cooled last month after the euro-area debt crisis pulled economies including Spain and Italy into recession and damped global growth prospects. The purchasing managers’ index fell to 53.7 in September from 56.3 in August, the National Bureau of Statistics and China Federation of Logistics and Purchasing in Beijing said today. That’s the lowest since at least March 2011. In the euro-area, a gauge slipped to 46.1 last month from 47.2 and a U.K. measure also fell. Readings below 50 indicate contraction. China’s weaker services number underscores a slowdown that spurred the Asian Development Bank to lower its 2012 regional growth estimate. As Europe’s economic slump deepens amid a fiscal squeeze and weakening confidence, the ADB said the threat of a “shock emanating from the unresolved euro-area sovereign debt crisis” is among the biggest downside risks to Asia.
“The global environment will remain challenging,” said Silvio Peruzzo, an economist at Nomura International Plc in London. “In the euro area, there’s a lack of demand because of austerity; some countries have suffered more than others. We expect the economy to shrink again in the third quarter with a significant chance for another contraction in the fourth.”

U.S., Europe Nowhere Close to Ending Crisis, Krugman Says (Bloomberg)
The U.S. and the European Union are “nowhere close to ending” the financial crisis and German-led austerity efforts may lead to a 1930s-style economic depression, Nobel laureate Paul Krugman said. Five years into the crisis, the U.S. needs “another round of stimulus” and Federal Reserve officials “should be doing whatever they can” to aid the recovery, while Europe needs a fiscal union to save its single currency, Krugman said in a speech in Belgrade today. “Europe must accept there are limits to austerity and that additional austerity won’t do anything but bring societies on the verge of collapse,” said Krugman, an economics professor at Princeton University. “No country will have prosperity until Germany and the ECB have decided that too much pain has been inflicted.”
The European Central Bank and the Fed have unveiled plans to fight the crisis and reduce borrowing costs. ECB President Mario Draghi last month announced an unlimited bond-buying program for distressed euro-area nations, while Fed Chairman Ben S. Bernanke has committed to another round of so-called quantitative easing.

Services in U.S. Expanded More Than Forecast in August (Bloomberg)
Service industries in the U.S. expanded in September by the most in six months, underpinning an economy that lost momentum in the first half of the year. The Institute for Supply Management’s non-manufacturing index climbed to 55.1, exceeding the most optimistic projection in a Bloomberg survey, from 53.7 in August, figures from the Tempe, Arizona-based group showed today. Readings above 50 signal expansion. ADP Employer Services said in a separate report that private payrolls increased 162,000 last month. “The economy seems to be leveling off,” said Paul Edelstein, director of financial economics at IHS Global Insight in Lexington, Massachusetts, who projected the services index would rise. “Domestic factors are starting to improve. Jobs are being created and people are feeling a little more confident so they are going to spend more.”
A sustained pickup in industries from construction to retailing that account for almost 90 percent of the economy will help make up for recent weakness in manufacturing. At the same time, a cooling global economy has prompted some service providers such as FedEx Corp. (FDX) to trim growth forecasts. Stocks advanced after the U.S. figures, with the Standard & Poor’s 500 Index climbing 0.3 percent to 1,450.34 at 2:37 p.m. in New York. The U.S. figures stand in contrast to other data today showing services industries from Asia to Europe slowed after the euro-area debt crisis pulled economies including Spain and Italy into recession.

ADP Says U.S. Companies Added 162,000 Workers to Payrolls (Bloomberg)
Companies added more workers than projected in September, evidence the labor market may be perking up, a private report based on payrolls showed. The 162,000 increase in employment followed a revised 189,000 jump in August, figures from Roseland, New Jersey-based ADP Employer Services showed today. The median forecast of 38 economists surveyed by Bloomberg projected a 140,000 advance. The hiring gains, which were led by companies with fewer than 500 workers, will help shore up consumer confidence and spending, which in turn will bolster economic growth. A Labor Department report on Oct. 5 may show private payrolls increased by 128,000 in September and unemployment rose to 8.2 percent from 8.1 percent the prior month, according to the Bloomberg survey median.
“Small and medium-size firms continue to be the driving force behind job growth,” Ward McCarthy, chief financial economist at Jefferies & Co. Inc. in New York, said in a research note. “Hiring at startup and small firms will continue to be the key to the sustainability of the labor market recovery going forward.” Stock-index futures rose after the report. The contract on the Standard & Poor’s 500 Index maturing in December climbed 0.1 percent to 1,442.6 at 9:09 a.m. in New York. Estimates for the ADP employment figures ranged from 90,000 to 190,000 in the Bloomberg survey.

U.S. States Teetering on Brink of Fiscal Cliff, Ganeriwala Says (Bloomberg)
The possibility of automatic federal budget cuts threatens U.S. states’ well-being, even as their revenue recovers, said Manju Ganeriwala, the incoming president of the National Association of State Treasurers. “We’re approaching the cliff, and hopefully it’s a climbing down and not just jumping from the cliff,” Ganeriwala, Virginia’s treasurer, said today at the State & Municipal Finance Conference hosted by Bloomberg Link in New York. If Congress doesn’t agree on how to reduce the federal deficit, states may lose funding and jobs when $600 billion in automatic tax increases and spending cuts take effect in January, said Ganeriwala, 56, who will head the association next year. That may further hinder progress for governments that cut jobs as tax revenue fell. The number of public positions in 2011 shrank by 1.3 percent, about 280,000 positions, according to data from the U.S. Department of Commerce. More than half those positions were from state and city administrations.
States already are confronting the “stupidity factor” of Congress’s waiting until the last minute to act, said Chipman Flowers Jr., the Delaware treasurer. “They’re going to solve the problem,” Flowers said. “They’re just going to wait until the 11th hour.”

China’s Slowdown Reverberates as ADB Cuts Forecasts (Bloomberg)
China’s services industry expanded the least in more than a year, underscoring a slowdown that spurred the Asian Development Bank to lower its 2012 regional growth estimate and caused a slide in Australian coal exports. The purchasing managers’ index from the Chinese government and logistics federation fell to 53.7 in September from 56.3 the previous month, a report showed today, while Australia recorded its widest trade deficit since March 2008 in August. The ADB today forecast Asia excluding Japan will expand 6.1 percent this year, the slowest pace since 2009. Asian stocks fell and commodities declined for a second day, while Australia’s dollar slipped to its lowest level in a month on concern global demand is faltering, putting pressure on authorities to support growth. Central banks in Japan, South Korea, Indonesia, Thailand, India and the Philippines are scheduled to meet this month to determine monetary policy as the region gauges the need for more stimulus measures.
“Deceleration in the region’s two giants -- the People’s Republic of China and India -- and in other major exporting economies is tempering earlier optimism,” the ADB said. “The ongoing sovereign debt crisis in the euro area and the looming fiscal cliff in the U.S. pose major risks to the outlook.” Asia’s exports have faltered as slower global growth crimps demand for the region’s goods. Malaysia’s shipments abroad unexpectedly slipped for the first time in three months in July, while Thailand and South Korea have recorded three straight months of declines in overseas sales.

China services PMI falls to lowest in nearly two years(Reuters)
China's normally robust services sector weakened sharply in September to its lowest point since November 2010, as slow growth in manufacturing finally began to feed through to the rest of the economy, an official survey showed on Wednesday.

India Pushes Economy Opening With FDI Insurance, Pension Plans (Bloomberg)
Indian Prime Minister Manmohan Singh is seeking to build on the biggest opening of the country’s economy in a decade with the cabinet today scheduled to consider proposals to lift caps on foreign investment in insurance and pension industries. Ministers will consider allowing overseas companies to own as much as 49 percent of local insurance ventures, from the current 26 percent, and for the first time permit foreign direct investment of as much as 26 percent in pension funds, according to two government officials with direct knowledge of the matter, who asked not to be identified, citing rules. The plans would need parliamentary approval to become law, which may prove difficult for a minority government.
After two years of policy paralysis, the Congress party-led government burst into life last month with decisions to throw open retail and aviation sectors, and its energy markets, to foreign investment and cut fuel subsidies. While the moves, which didn’t need the support of lawmakers, splintered Singh’s biggest ally from the ruling coalition, the prime minister defended his actions saying only strong economic growth would pay for programs to aid millions of poor people. “It’s amazing how quickly expectations of the government have changed,” said Alex Mathews, research head at Geojit BNP Paribas Financial Services Ltd. (GBNP) in the southern city of Kochi. “The government looks set to continue with bold reforms.”
Singh’s administration has rejected a recommendation by a parliamentary panel, which in December said a further increase in foreign direct investment may not be in the interest of the country’s insurance industry, according to the people, who spoke yesterday.

Euro-Region August Retail Sales Unexpectedly Increase on Germany (Bloomberg)
Euro-area retail sales unexpectedly increased for a fourth month in August as demand rebounded in Germany, Europe’s largest economy. Sales in the 17-member euro area rose 0.1 percent from July, when they also gained a revised 0.1 percent, the European Union’s statistics office in Luxembourg said today. Economists had forecast a decline of 0.1 percent, according to the median of 17 estimates in a Bloomberg News survey. From a year earlier, sales dropped 1.3 percent. European households are tightening their belts as the region’s economy shows signs of a deepening slump. Euro-area unemployment held at a record 11.4 percent in August and economic confidence fell last month after the fiscal crisis and budget cuts forced at least five euro nations into recessions. In Germany, retail sales rose 0.3 percent from July, when they fell 1 percent, today’s report showed. France reported a drop of 0.8 percent, while sales rose 2.1 percent in Spain.

Poland Signals November Cut After Holding Borrowing Costs (Bloomberg)
Poland’s central bank signaled it may cut borrowing costs next month if the economy slows further after unexpectedly leaving them at the highest level since 2009 for a fourth meeting. The Narodowy Bank Polski kept the benchmark seven-day interest rate at 4.75 percent yesterday. Eight economists in a Bloomberg survey predicted no change, while 27 expected a 25 basis-point reduction that would have reversed a rate increase in May, the only one by a central bank in the European Union this year. The NBP last lowered the benchmark in June, 2009. While central banks around the world have eased monetary policy to avert a recession, Poland has kept rates at the highest in three years to tame inflation, even after Governor Marek Belka signaled the need to reduce them amid Europe’s debt crisis. Poland’s expansion eased in the second quarter to 2.4 percent from a year earlier, the slowest since 2009.
“Inflation is still high and we wanted to make sure the trend of weakening economic growth will persist,” Belka said at a news conference yesterday. The central bank “will ease monetary policy” next month should data show the economy slowing further and limited inflation risks, according to an e- mailed statement after today’s meeting. The zloty strengthened 0.4 percent to trade at 4.0931 per euro at 5:01 p.m. in Warsaw yesterday, compared with 4.1171 before the release. The five-year government bond yield jumped as many as 9 basis points after the decision and was at 4.210 percent, up 5 basis points on the day.

Eurozone Sept PMI slide suggests no growth return (Reuters)
Dwindling new orders and faster layoffs marked a worsening decline for euro zone companies last month, according to business surveys that dent hopes the economy will return to growth before 2013.

DTN Closing Grain Comments 10/03 14:52 (CME)
Soybeans Stage Impressive Recovery
A return of commercial interest, possibly signaling fresh Chinese business, stoked a strong rally near support in the bean market Wednesday. Corn and wheat had a quiet day with the former trading near unchanged for a majority of the day.

Pro Farmer: After The Bell Wheat Recap (CME)
Wheat futures improved to mixed trade in late-morning trade. Chicago and Kansas City futures ended mixed, while Minneapolis futures ended slightly higher. Early pressure in the wheat pit was tied to spillover from soybeans and a lack of fresh news, but as soybeans firmed around midday, wheat followed suit.

Wheat Market Recap Report (CME)
December Wheat finished up 1 1/2 at 873, 5 1/2 off the high and 15 up from the low. March Wheat closed up 1 at 884. This was 15 1/2 up from the low and 5 1/2 off the high.
December Chicago wheat ended the session nearly unchanged while KC ended lower and Minneapolis higher. Long liquidation continued overnight as outside market instability became prevalent following the European open and the downside momentum accelerated after it was announced that the US failed to do any of the Egyptian wheat tender overnight. Egypt bought 240,000 tonnes of French and Argentinian soft wheat for December 11-20th shipment. The spread between French and US soft wheat narrowed from the last tender and there was no Russian or Ukrainian wheat offered. The wheat market rallied late in the session after corn and soybeans climbed off session lows and turned positive. The lower trader early on was linked to weather forecasts that suggest more rain for areas of Kansas, Oklahoma, and Texas next week which will likely ease soil moisture deficits for wheat planting. Outside markets offered very little support throughout the day with crude oil trading 4% lower and the US Dollar climbed higher.
December Oats closed up 3 at 363 1/4. This was 5 1/4 up from the low and 2 1/4 off the high.

Pro Farmer: After The Bell Corn Recap (CME)
Corn futures improved to choppy trade around midday and the market remained in a similar posture into the close. Futures settled 1 1/2 to 2 1/4 cents lower through the July contract, while deferred months were roughly 1 to 3 cents higher. Futures faced pressure overnight and this morning, but around midday, a rebound in soybeans returned some bargain buying interest to the corn market.

Corn Market Recap for 10/3/2012 (CME)
December Corn finished down 1 1/2 at 756 3/4, 6 3/4 off the high and 9 3/4 up from the low. March Corn closed down 2 1/4 at 757 1/2. This was 9 1/4 up from the low and 6 3/4 off the high.
December corn ended the session slightly lower on the day but traded into positive territory near the closing bell. Corn found support late in the session after soybeans and wheat rallied off session lows. Midsession weakness was linked to sharply lower wheat and soybean markets and profit taking after a closely followed trade house reported their average corn yield at 123.9 bushels per acre vs. 121.4 previously. Production rose to 10.827 billion bushels vs. 10.607 previously. The USDA in September showed a 122.8 yield and production at 10.727 billion bushels. Additional pressure was added after Ethanol production for the week ending September 28th averaged 785,000 barrels per day. This is down 3% vs. last week and down 9% vs. last year. Corn used in last week's production is estimated at 82.4 million bushels vs. 84.9 the week prior. Weekly ethanol production and weekly corn usage in ethanol production were pegged at their lowest levels since October 30, 2009. The US Dollar traded higher throughout the day and crude oil fell 4% which limited gains in the grain market. November Rice finished down 0.13 at 15.24, 0.08 off the high and equal to the low.

India's Oct-Sept'12 coffee exports fall from record levels (Reuters)
Coffee exports from India eased from the previous year's record levels, falling 8.6 percent in the coffee year that started in October 2011, weighed by depleting stocks and lack of buyers for arabica.

Oil Trades Near Two-Month Low as U.S. Output Rises, Demand Drops (Bloomberg)
Oil traded near a two-month low in New York after the government reported that U.S. crude production climbed to the highest level in more than 15 years while fuel consumption decreased. Futures fluctuated after dropping 4.1 percent yesterday, the most since June, following an Energy Department report that output rose by 11,000 barrels a day to 6.52 million last week, the most since December 1996. Fuel demand fell 0.3 percent to 18.3 million barrels a day in the four weeks ended Sept. 28, the lowest level since April. Crude and distillate stockpiles declined as gasoline supplies increased.
“The market just believes that there is too much supply, and when it doesn’t have the economic activity to back it up, generally the price must go down,” said Jonathan Barratt, chief executive officer of Barratt’s Bulletin, a commodity newsletter in Sydney, who sees prices as low as $82 a barrel if inventories don’t shrink and the global economy doesn’t improve. “We don’t have the economic activity that should send prices higher.” Crude for November delivery was at $87.99 a barrel, down 15 cents, on the New York Mercantile Exchange at 11:02 a.m. in Tokyo. It earlier fell as much as 26 cents, or 0.2 percent. Futures dropped $3.75 yesterday to close at $88.14, the lowest level since Aug. 2. Prices are down 11 percent this year.

OIL-Oil falls as global economic data dims demand outlook
NEW YORK, Oct 3 (Reuters) - Oil prices fell sharply on Wednesday as disappointing economic data from China and Europe reinforced concerns about slowing growth and a weakening demand for petroleum, even as supportive U.S. data strengthened the dollar.
"The global economy is in a rut, and even with supportive EIA data crude is down," said Dan Flynn, an analyst at Price Futures Group in Chicago.

US oil stocks fall unexpectedly last week, distillates drop-EIA
NEW YORK, Oct 3 (Reuters) - U.S. crude oil stocks declined unexpectedly last week and distillate inventories fell more steeply than forecast, government data showed on Wednesday.
Domestic stocks of crude dropped by 482,000 barrels in the week to Sept. 28, the Energy Information Administration reported, despite an increase in imports. Analysts polled by Reuters ahead of the data release had forecast a stock gain of 1.5 million barrels.

NATURAL GAS-US natgas futures post 1st loss in 7 sessions
NEW YORK, Oct 3 (Reuters) - U.S. natural gas futures ended lower on Wednesday for the first time in seven sessions, hit by a slightly milder turn in the extended weather forecast and profit-taking ahead of Thursday's inventory report despite the still-cool outlook for next week.
"The latest forecast from NOAA is showing a slightly smaller area of colder temperatures with the severity of the cold also eased somewhat. The early winter season demand bump may not be as large as thought just a week or so ago," Energy Management Institute's Dominick Chirichella said in a report.

EURO COAL-Stable prices, flurry of S.African trades seen
LONDON, Oct 3 (Reuters) - Prompt physical coal prices were barely changed again as the market waited for a much-needed seasonal rise in demand to absorb some of the persistent oversupply.
"There were various types of buyers involved, I wouldn't say it's driven by Indian buying," one European trader said.

Recap Energy Market Report (CME)
November crude oil prices experienced a wide range downdraft on the session, with very active trading volume. Prices trended lower throughout the session and breeched last week's low of $88.95 in the process. Early weakness came on demand concerns in the wake of weaker than expected economic readings in China and Europe. While there was a round of positive US economic data this morning, traders said the more dominant concern was a global economic slowdown. This morning's EIA inventory data showed an unexpected decline in crude stocks last week of 482,000 barrels. Current inventory levels stand at 364.698 million barrels, which is the highest for this week since 2010. However, soft import activity of 8.106 million barrels per day contributed to the weekly stock draw. The refinery operating rate was 88.2%, up 0.8% from last week. November crude oil managed a brief reprieve from early selling but ultimately turned lower, falling to its lowest level since August 2nd in late-afternoon trade.

METALS-Copper slips after 4-day rise, economic woes drag
SINGAPORE, Oct 3 (Reuters) - Copper fell on Wednesday after climbing for four days, as a fragile global economy and Europe's lingering debt crisis curbed buying interest, with a week-long public holiday in top copper consumer China keeping trading volumes extremely thin.
"On one hand you have the more positive vibe from U.S. players with people encouraged by policy action there. But data from China is still showing the economy is bottoming -- not yet improving -- and you still have this political paralysis going on ahead of the leadership transition in China," said ANZ commodity strategist Nick Trevethan.

PRECIOUS-Gold holds near 11-month high on Spain caution
SINGAPORE, Oct 3 (Reuters) - Gold held near an 11-month high on Wednesday, as uncertainty over Spain's bailout plan kept investors on their toes while they wait for a key U.S. job market report to shed light on the effectiveness of the latest stimulus measures.
"The real challenges will again drive the market," said Jeremy Friesen, a commodity strategist at Societe Generale in Hong Kong.

Gold Market Recap Report (CME)
The gold market waffled around both sides of unchanged today but eventually the market righted the ship and clawed back into positive ground. As suggested in the mid day coverage, gold at times this morning seemed to fall in the face of better than expected US data but it should be noted that gold was quickly able to recover after the impact of the ISM report. Gold was probably held back slightly today by weakness in the Euro, Canadian and energy prices. Some bulls suggest that the resiliency in gold today was largely the result of looming ECB and BOE meetings. Perhaps gold drafted some lift off news that ECB gold holdings rose in a quarterly report. Another issue that might have provided some lift in gold prices today were headlines that the South African Mineworkers Union and the Chamber of mines agreed to re-open wage negotiations for the gold mining sector.

Soybeans Advance as 16% Slump From Record Attracts Importers (Bloomberg)
Soybeans gained as a 16 percent slide from last month’s record to a three-month low yesterday probably attracted importers on concern the worst U.S. drought in half a century will cut its reserves to the lowest level in nine years. The November-delivery contract rose as much as 0.5 percent to $15.3925 a bushel on the Chicago Board of Trade and was at $15.36 at 9:22 a.m. Singapore time. Futures, that surged to an all-time high of $17.89 a bushel on Sept. 4, dropped yesterday to $15.04, the lowest price since July 5. Taiwan is seeking to buy as much as 180,000 metric tons of soybeans from the U.S. or Brazil at a tender today, buyer Taichung Group said yesterday. U.S. exporters sold 21,000 tons of soybean oil to China, the Department of Agriculture said yesterday, after reporting sales of 180,000 tons of soybeans on Sept. 28 and 110,000 tons of the oilseed on Sept. 27.
“Any fall in prices usually does bring out some opportunistic buyers,” Michael Creed, an agribusiness economist at National Australia Bank Ltd., said by phone from Melbourne today. “Any news out of China tends to be closely watched.” Inventories of soybeans in the U.S., the largest grower last year, were estimated to drop to 3.13 million tons by August 2013, the smallest since 2004, according to the USDA outlook on Sept. 12. Corn for December delivery declined 0.3 percent to $7.545 a bushel, while wheat for delivery in the same month fell 0.3 percent to $8.70 a bushel. U.S. production of ethanol, which can be made from corn, fell 3 percent last week to 785,000 barrels a day, the least since the Energy Department began publishing weekly data in 2010.

Pro Farmer: After The Bell Soybean Recap (CME)
Soybean futures finished well off session lows but could only muster a mixed close. Soybean futures settled 1 cent lower to as much as 13 cents higher in far-deferred contracts. Meal and soyoil futures mildly favored the upside on the close. After facing active followthrough selling early, soybean futures staged a late-morning rally amid ideas the downside has been overdone.

Soybean Complex Market Recap (CME)
November Soybeans finished up 1 at 1531 1/2, 12 1/4 off the high and 27 1/2 up from the low. January Soybeans closed down 1 1/4 at 1532. This was 25 3/4 up from the low and 11 1/2 off the high. December Soymeal closed up 1.5 at 464.4. This was 9.3 up from the low and 3.9 off the high. December Soybean Oil finished up 0.04 at 50.73, 0.32 off the high and 0.67 up from the low. November soybeans were on their way to test $15.00 in early trade today but managed to find support late in the session to close in positive territory. Bullish traders suggested yields might be better than expected but pointed to the staggering export demand pace as reason for prices to move higher. A closely followed trade house released their revised US average soybean yield and production estimates after the close yesterday. The average soybean yield was reported at 38.2 bushels per acre vs. 36.7 in September. Production rose to 2.849 billion bushels vs. 2.739 previously. The USDA in September had yield at 35.3 and production at 2.634 billion bushels. Most in the trade expect demand to be revised higher if soybean yields rise on next week's USDA report. This could offset some of the bearish enthusiasm in the long term. China remains on holiday this week but it was reported this morning that 21,000 tonnes of US Soybean Oil was sold to China overnight for 2012/13 delivery. This offered a brief period of support for soybean oil futures. Outside markets limited price gains as the US Dollar traded higher and crude fell by 4%.

Argentina's Aug soy crushing falls 6.8 pct yr/yr on drought (Reuters)
Argentina's soy crushing activity fell 6.8 percent in August to 2.81 million tonnes from a year ago due in part to lower supplies caused by last season's drought, the Agriculture Ministry said in its latest report.

EDIBLES: Malaysian palm oil futures rebounded from their lowest in nearly three years as investors looked for bargains, although traders said the recovery could be short-lived as fundamentals remain weak. (Reuters)

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